The Small Industries Development Bank of India (SIDBI), the country’s main financial institution for promoting, financing, and developing micro, small, and medium-sized enterprises (MSMEs), has approved Rs 650 crore in funding for two small finance banks (SFBs), AU Small Finance Bank and Jana Small Finance Bank. SIDBI said in a statement on Tuesday that it has approved financial support to the two small finance banks so that they can reach out to small-sized non-banking financial companies (NBFCs) or micro finance institutions (MFIs), which in turn help small enterprises and micro entrepreneurs.
NBFCs and MFIs serve the informal MSME sector, particularly new credit firms, small retail commerce, and so on, and give knowledge as a result of the ‘next-door’ advantage. The COVID-19 pandemic has had a negative impact on MSMEs, causing a slowdown in income-generating operations for these small firms and micro enterprises. The collections and liquidity positions of NBFCs and MFIs have also suffered as a result of this. Smaller NBFCs and MFIs, in particular, have historically had trouble acquiring appropriate institutional capital and have had to rely on larger, more established non-banking firms and SFBs for help.
“The decision is projected to assist more than 40 small-sized NBFCs or MFIs, which will help in easing the problems faced by such NBFCs or MFIs in garnering resources for their companies,” said Sivasubramanian Ramann, chairman and managing director of SIDBI. Ramann stated that a sum of Rs 530 crore has already been released to the company.